In the paper, we use the theory of mechanism design to exhibit the cost of efficient provision of healthcare, defined as the uniquely defined sum of individual side payments which would eliminate moral hazard. It is argued that this cost may be used to assess the costs arising from use of the treatment in cases where it is not appropriate from a strictly medical point of view. An example is given to indicate how this assessment might enter into practical cost-effectiveness analysis.

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We consider a simple model of international trade under uncertainty, where
production takes time and is subject to uncertainty. The riskiness of production depends
on the choices of the producers, not observable to the general public, and these choices
are influenced by the availability and cost of credit. If investment is financed by a
bond market, then a situation may arise where otherwise identical countries end up
with different levels of interest and different choices of technique, which again implies
differences in achieved level of welfare. Under suitable conditions on the parameters
of the model, the market may not be able to supply credits to one of the countries.
The introduction of financial intermediaries with the ability to control the debtors
may change this situation in a direction which is welfare improving (in a suitable sense)
by increasing expected output in the country with high interest rates, while opening up
for new problems of asymmetric information with respect to the monitoring activity of
the banks.
Keywords: Capital outflow, financial intermediaries, moral hazard
JEL classification: F36, D92, E44

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A model of trade with several countries where local integration benefits all

Hansen, Bodil O.; Keiding, Hans(København, 2005)

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Abstract:

For the study of economic integration, it is costumary to use a three countryworld,
where two of the countries may introduce forms of closer economic cooperation. In
the present model, we follow this tradition but put special emphasis on the role of
credit and entrepreneurship. Our model is of the standard neoclassical type, with the
addition that production takes time and is subject to uncertainty. Also, firms must use
the financial system in order to buy inputs; the cost of credit may differ among countries
and industries, reflecting their basic patterns of uncertainty.
Following the Newbery-Stiglitz approach, we show that in such model we may
exhibit cases of Pareto inferior trade and, in particular, Pareto inferior economic
integration. More specifically, we show that integrating countries of very different
economic size may give rise to adverse effects on welfare, whereas integration of
countries with a more similar economic structure and size tends to have beneficial
effects for the parties.
Keywords: trade, uncertainty, Pareto inferior trade, regional integration.
JEL classification: F11, F15, F34

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We consider a model of commercial television market, where private broadcasters coexist with a public television broadcaster. Assuming that the public TV station follows a policy of Ramsey pricing whereas the private stations are profit maximizers, we consider the equilibria in this market and compare with a situation where the public station is privatized and acts as another private TV broadcaster. A closer scrutiny of the market for commercial television leads to a distinction between target rating points, which are the prime unit of account in TV advertising, and net coverage, which is the final goal of advertisers. Working with net coverage as the fundamental concept, we exploit the models of competition between public and private price and quantity in order to show that privatization of the public TV station entails a welfare loss and results in TV advertising becoming more expensive.
Keywords: TV broadcasting, imperfect competition, Ramsey pricing, welfare comparison.
JEL classification: L11, L82, L33